Intrinsic value of ChinaNet Online Holdings - CNET

Previous Close

$1.04

  Intrinsic Value

$0.34

stock screener

  Rating & Target

str. sell

-67%

Previous close

$1.04

 
Intrinsic value

$0.34

 
Up/down potential

-67%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CNET stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.38
  37.50
  34.25
  31.33
  28.69
  26.32
  24.19
  22.27
  20.54
  18.99
  17.59
  16.33
  15.20
  14.18
  13.26
  12.43
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
Revenue, $m
  35
  48
  65
  85
  109
  138
  171
  209
  252
  300
  353
  411
  473
  541
  612
  688
  769
  854
  943
  1,036
  1,133
  1,234
  1,340
  1,450
  1,564
  1,683
  1,806
  1,934
  2,068
  2,206
  2,350
Variable operating expenses, $m
 
  63
  84
  111
  142
  180
  223
  273
  329
  391
  460
  534
  615
  703
  796
  895
  999
  1,109
  1,225
  1,346
  1,472
  1,604
  1,742
  1,884
  2,033
  2,187
  2,348
  2,514
  2,688
  2,868
  3,055
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  41
  63
  84
  111
  142
  180
  223
  273
  329
  391
  460
  534
  615
  703
  796
  895
  999
  1,109
  1,225
  1,346
  1,472
  1,604
  1,742
  1,884
  2,033
  2,187
  2,348
  2,514
  2,688
  2,868
  3,055
Operating income, $m
  -6
  -15
  -20
  -26
  -33
  -42
  -52
  -63
  -76
  -91
  -106
  -123
  -142
  -162
  -184
  -206
  -230
  -256
  -283
  -310
  -340
  -370
  -402
  -435
  -469
  -504
  -541
  -580
  -620
  -661
  -704
EBITDA, $m
  -4
  -13
  -17
  -23
  -29
  -37
  -46
  -56
  -67
  -80
  -94
  -109
  -126
  -144
  -163
  -183
  -204
  -227
  -251
  -275
  -301
  -328
  -356
  -386
  -416
  -447
  -480
  -514
  -550
  -587
  -625
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  -6
  -15
  -20
  -26
  -34
  -42
  -52
  -64
  -77
  -92
  -108
  -125
  -144
  -165
  -187
  -210
  -234
  -260
  -287
  -316
  -346
  -377
  -409
  -442
  -477
  -514
  -551
  -590
  -631
  -673
  -717
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -6
  -15
  -20
  -26
  -34
  -42
  -52
  -64
  -77
  -92
  -108
  -125
  -144
  -165
  -187
  -210
  -234
  -260
  -287
  -316
  -346
  -377
  -409
  -442
  -477
  -514
  -551
  -590
  -631
  -673
  -717

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  30
  33
  44
  58
  75
  95
  117
  144
  173
  206
  242
  282
  325
  371
  420
  472
  527
  585
  646
  710
  777
  847
  919
  994
  1,073
  1,154
  1,239
  1,327
  1,418
  1,513
  1,612
Adjusted assets (=assets-cash), $m
  24
  33
  44
  58
  75
  95
  117
  144
  173
  206
  242
  282
  325
  371
  420
  472
  527
  585
  646
  710
  777
  847
  919
  994
  1,073
  1,154
  1,239
  1,327
  1,418
  1,513
  1,612
Revenue / Adjusted assets
  1.458
  1.455
  1.477
  1.466
  1.453
  1.453
  1.462
  1.451
  1.457
  1.456
  1.459
  1.457
  1.455
  1.458
  1.457
  1.458
  1.459
  1.460
  1.460
  1.459
  1.458
  1.457
  1.458
  1.459
  1.458
  1.458
  1.458
  1.457
  1.458
  1.458
  1.458
Average production assets, $m
  7
  9
  12
  16
  20
  26
  32
  39
  47
  56
  66
  76
  88
  101
  114
  128
  143
  159
  175
  193
  211
  230
  249
  270
  291
  313
  336
  360
  385
  410
  437
Working capital, $m
  6
  3
  4
  5
  6
  8
  10
  12
  14
  17
  20
  23
  27
  31
  35
  39
  44
  49
  54
  59
  65
  70
  76
  83
  89
  96
  103
  110
  118
  126
  134
Total debt, $m
  2
  2
  5
  9
  13
  18
  23
  30
  37
  46
  55
  64
  75
  87
  99
  112
  126
  140
  156
  172
  188
  206
  224
  243
  262
  283
  304
  326
  349
  372
  397
Total liabilities, $m
  8
  8
  11
  15
  19
  24
  29
  36
  43
  52
  61
  70
  81
  93
  105
  118
  132
  146
  162
  178
  194
  212
  230
  249
  268
  289
  310
  332
  355
  378
  403
Total equity, $m
  22
  25
  33
  44
  56
  71
  88
  108
  130
  155
  182
  211
  244
  278
  315
  354
  396
  439
  485
  533
  583
  635
  689
  746
  805
  866
  929
  995
  1,064
  1,135
  1,209
Total liabilities and equity, $m
  30
  33
  44
  59
  75
  95
  117
  144
  173
  207
  243
  281
  325
  371
  420
  472
  528
  585
  647
  711
  777
  847
  919
  995
  1,073
  1,155
  1,239
  1,327
  1,419
  1,513
  1,612
Debt-to-equity ratio
  0.091
  0.090
  0.150
  0.200
  0.230
  0.250
  0.270
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -15
  -20
  -26
  -34
  -42
  -52
  -64
  -77
  -92
  -108
  -125
  -144
  -165
  -187
  -210
  -234
  -260
  -287
  -316
  -346
  -377
  -409
  -442
  -477
  -514
  -551
  -590
  -631
  -673
  -717
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
  18
  21
  23
  26
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  75
  79
Funds from operations, $m
  1
  -13
  -17
  -23
  -29
  -37
  -46
  -57
  -68
  -81
  -96
  -111
  -128
  -146
  -166
  -187
  -208
  -231
  -256
  -281
  -307
  -335
  -363
  -393
  -424
  -457
  -490
  -525
  -561
  -599
  -638
Change in working capital, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
Cash from operations, $m
  0
  -14
  -18
  -24
  -31
  -39
  -48
  -59
  -71
  -84
  -99
  -114
  -132
  -150
  -170
  -191
  -213
  -236
  -261
  -286
  -313
  -341
  -370
  -400
  -431
  -463
  -497
  -532
  -569
  -607
  -646
Maintenance CAPEX, $m
  0
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -21
  -23
  -26
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -53
  -57
  -61
  -65
  -70
  -75
New CAPEX, $m
  -2
  -2
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -3
  -3
  -5
  -6
  -8
  -9
  -11
  -13
  -15
  -18
  -20
  -23
  -26
  -28
  -31
  -35
  -38
  -42
  -46
  -49
  -53
  -57
  -62
  -65
  -70
  -75
  -80
  -85
  -90
  -96
  -102
Free cash flow, $m
  -3
  -17
  -23
  -30
  -38
  -48
  -59
  -72
  -86
  -101
  -119
  -137
  -157
  -179
  -202
  -226
  -251
  -278
  -306
  -335
  -366
  -398
  -431
  -465
  -501
  -538
  -577
  -617
  -659
  -702
  -748
Issuance/(repayment) of debt, $m
  1
  2
  3
  3
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
Issuance/(repurchase) of shares, $m
  0
  22
  28
  37
  46
  57
  70
  84
  99
  117
  135
  155
  176
  199
  223
  249
  276
  304
  333
  364
  396
  429
  463
  499
  536
  575
  615
  656
  700
  745
  792
Cash from financing (excl. dividends), $m  
  1
  24
  31
  40
  50
  62
  76
  91
  106
  125
  144
  165
  187
  211
  235
  262
  290
  319
  348
  380
  413
  446
  481
  518
  556
  595
  636
  678
  723
  769
  817
Total cash flow (excl. dividends), $m
  -2
  7
  8
  10
  12
  14
  16
  19
  21
  23
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  61
  64
  66
  69
Retained Cash Flow (-), $m
  5
  -22
  -28
  -37
  -46
  -57
  -70
  -84
  -99
  -117
  -135
  -155
  -176
  -199
  -223
  -249
  -276
  -304
  -333
  -364
  -396
  -429
  -463
  -499
  -536
  -575
  -615
  -656
  -700
  -745
  -792
Prev. year cash balance distribution, $m
 
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -11
  -20
  -26
  -34
  -43
  -53
  -65
  -78
  -93
  -109
  -127
  -147
  -167
  -189
  -213
  -237
  -263
  -291
  -319
  -349
  -380
  -413
  -447
  -482
  -518
  -556
  -595
  -636
  -679
  -723
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -10
  -18
  -23
  -28
  -33
  -39
  -44
  -49
  -54
  -57
  -60
  -63
  -64
  -64
  -62
  -60
  -57
  -54
  -49
  -44
  -39
  -34
  -29
  -25
  -20
  -16
  -13
  -10
  -7
  -5
Current shareholders' claim on cash, %
  100
  36.8
  13.9
  5.4
  2.2
  0.9
  0.4
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

ChinaNet Online Holdings, Inc. is a holding company that conducts its primary businesses through its subsidiaries and operating entities (the variable interest entities (VIEs)). The Company is a business-to-businesses (B2B), integrated Internet technology company providing online-to-offline (O2O) sales channel expansion, precision marketing and the related data services for small and medium-sized enterprises, and entrepreneurial management and networking services for entrepreneurs in the People's Republic of China. Its segments include Internet advertising and TV advertising. Its services include preparing and publishing media enabled advertising and marketing campaigns for clients on the Internet, mobile phone, television and other communication channels; hosting mini-sites with online messaging and consulting functionalities; providing search engine marketing services; providing data services, and providing social networking and information sharing services to entrepreneurs.

FINANCIAL RATIOS  of  ChinaNet Online Holdings (CNET)

Valuation Ratios
P/E Ratio -2.1
Price to Sales 0.4
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -6.3
Growth Rates
Sales Growth Rate 9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 9.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -18.5%
Ret/ On Assets - 3 Yr. Avg. -22.4%
Return On Total Capital -23.1%
Ret/ On T. Cap. - 3 Yr. Avg. -28.2%
Return On Equity -24.5%
Return On Equity - 3 Yr. Avg. -29.2%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 22.9%
Gross Margin - 3 Yr. Avg. 21.2%
EBITDA Margin -11.4%
EBITDA Margin - 3 Yr. Avg. -21.6%
Operating Margin -17.1%
Oper. Margin - 3 Yr. Avg. -27.5%
Pre-Tax Margin -17.1%
Pre-Tax Margin - 3 Yr. Avg. -26.5%
Net Profit Margin -17.1%
Net Profit Margin - 3 Yr. Avg. -27.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 6.3%
Payout Ratio 0%

CNET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNET stock intrinsic value calculation we used $35 million for the last fiscal year's total revenue generated by ChinaNet Online Holdings. The default revenue input number comes from 2016 income statement of ChinaNet Online Holdings. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CNET stock valuation model: a) initial revenue growth rate of 37.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CNET is calculated based on our internal credit rating of ChinaNet Online Holdings, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of ChinaNet Online Holdings.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CNET stock the variable cost ratio is equal to 131.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CNET stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for ChinaNet Online Holdings.

Corporate tax rate of 27% is the nominal tax rate for ChinaNet Online Holdings. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CNET stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CNET are equal to 18.6%.

Life of production assets of 5.5 years is the average useful life of capital assets used in ChinaNet Online Holdings operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CNET is equal to 5.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $22 million for ChinaNet Online Holdings - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 12.338 million for ChinaNet Online Holdings is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of ChinaNet Online Holdings at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ ChinaNet & Tencent Partner to Host Charity Foundation Event   [Oct-13-17 07:30AM  GlobeNewswire]
▶ Company News for August 17, 2016   [Aug-17-16 10:10AM  Zacks]
▶ 4 Stocks Under $10 Making Big Moves   [May-26  01:56PM  at TheStreet]
Financial statements of CNET
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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